By Zelalem Girma
Ethiopia has implemented extensive government support programmes to promote MSEs development to achieve sustainable economic growth
Recently, the 14th International Conference on the Ethiopian Economy organized by Ethiopia Strategy Support Programme (ESSP) of the International Food Policy Research Institute (IFPRI) was held from July 21 - 23, 2016 at the Ethiopian Economic Associations (EEA) Head Quarter in Addis Ababa.
At the conference more than 98 presentations were made in four plenary and six parallel sessions. Participants drawn from federal and regional government offices, universities across the country, civil society and international organizations, local and international research institutes and EEA members discussed on research presented by various partner institutions. The series of meetings of the conference have proved to be an excellent forum for Ethiopian and international researchers conducting research on Ethiopian economy. It was also found to be useful for researchers to present and discuss research findings related to the performance and development of the Ethiopian economy.
As the conference brings scholars together across the country and abroad, it provides best opportunities for policy makers and researchers to understand in depth the complex challenges that the county would face in this fast moving global state of affairs.
Among the scholars presented research findings, Executive Director of AEMFI Dr. Wolday Amha showed the sustainability of the recent economic performance of Ethiopia in the last decade, and how the country stimulates the private sector, particularly micro, small and medium sized businesses.
According to Dr. Wolday, the government has been committed to invest huge resources to provide all-rounded support services to MSE operators, particularly in urban areas. The public engagement in Ethiopia has been effective on allowing youth-owned MSEs to create more job opportunities in urban areas. Whereas, it was ineffective in enhancing the long-term performance of MSEs, addressing some business related barriers that impeded the creation of innovative high-growth oriented MSEs, he added.
Hence, there is a need to develop a tailored programme to leading firms and MSEs in the growth phase. Dr. Wolday indicated that the support programmes are likely effective on improving the human capital development process of a firm, and in turn improve the strategic management skills of managers and employees.
To this end, Ethiopia has implemented extensive government support programmes to promote MSEs development to achieve sustainable economic growth, through employment creation and poverty reduction, Dr. Wolday says.
Regarding factors contributing towards creating favourable legal and institutional environment, Dr. Wolday explained that the availability of favourable legal framework such as property rights, business registration procedures, supportive taxation and effective law enforcement and crime prevention would reduce the transaction cost of MSE operators.
Likewise, Dr. Wolday added that the five-year MSE development strategy designed to complement GTP I expands employment opportunities and lays the foundation for private sector development in Ethiopia. In fact, the government has allocated huge budgetary resources to provide package of support services, such as providing working and marketing premises, build the capacity of MSEs by providing technical and management training, industrial extension, market linkages, and technology transfer, and financial services through one-stop-service-centres.
On the other hand, AAU Vice-President for Research Dr. Tassew Woldehanna divided enterprises into necessity-driven and opportunity-driven entrepreneurs. According to him, necessity-driven enterprises are those entrepreneurs who started their businesses through push factor such as to escape from being unemployed due to lack of skill and proper education, and those who are forced by friends and family factors. Whereas opportunity-driven enterprises are those started their businesses as a result of observing the enabling business environment and believed that self-employment is better than being employed by others.
Therefore, according to his findings, the majority of the youth started their own business expecting higher profit and income in self-employment in a short span of time. Having the capability, the skill to start new business has been considered as the other reason for youth owned MSE operators to engage in self-employment.
In this regard, the initial capital matching with the new business, and the influence of parents are the other significant reasons to withdraw from starting their own businesses. Moreover, his findings asserted that there have also been youth owned MSE operators which were forced to start their own business because they lacked other options to defeat their lives.
Similarly, AEMFI Research Fellow Manex Yonis presented his findings on the topic - The Urban Labor Market and Youth Unemployment in Ethiopia - briefing the characteristics and challenges of Ethiopian youths in employment comparing with African entrepreneurial perspectives.
He noted that about 75 per cent of the Africa's total population is under 34 years of age. Each year, per average, around two million young people join the youth labour force of the Sub-Saharan region for the last one decade.
Currently, Africa is facing greatest challenge of providing job for the youth in spite of enjoying remarkable economic growth. Ethiopia is one of those African countries which their labour markets have been highly featured by persisting high urban unemployment.
In this regard, he says that the urban labour market in Ethiopia is explicitly explained by the rapid growth of labour supply as the labor force is growing at higher rate than the population growth - the labour force grew on average by 11 per cent per year between 2005 and 2012; whereas the population grew by 10.4 per cent.
According to Manex, being unemployed and youth in Ethiopia can lead to increase the risk of poverty, waste of productive resource, increase income inequality and social chaos.
According to his findings, the urban labour market indicated improvement as the employment rate grew and the unemployment rate declined over the last decade. Such labour market improvement, particularly after 2009, could be due to the introduction of government projects, particularly the cobblestone project and the urban housing development project, and micro and small enterprises expansion in urban areas.
In sum, long-term employment should be a major care for young people in urban areas of the country, as employment is considered as a major way out from poverty. In addition, government need to work on supporting self-employment entrepreneurs through curbing lack of finance, machineries, and production and marketing places. TVETs should also build their capacity and establish entrepren eurial training centres to complement their experiences.
Manex suggested that unless the country gives priority and due focus on sustainable pathways and long-term solutions to address youth unemployment, it could lead to economic, social and political crisis. There should be a desperate need to create an enabling policy and regulatory environment and implement well-designed support programmes to expand wage and self-employment for the youth. This requires coordinated interventions of the key stakeholders, such as government, private sectors, the public and the youth themselves.
Furthermore, the development of MSEs need to be expanded to rural areas with supports such as technical and business development training, access to finance and access other resources - land, power, technology, markets, and among others. Read more here
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